Basically, self-dealing involves most direct or indirect transactions (often financial transactions) between a foundation and a “disqualified person” regardless of whether the prohibited transaction would benefit the foundation and is otherwise a fair and reasonable transaction. How to Avoid Self-Dealing
is a plain-speak overview that helps you safeguard your private foundation against acts of self-dealing.
Though there are specified exceptions to the rules below, self-dealing can occur whenever a foundation and a disqualified person enter into one of the following prohibited transactions:
- The sale, exchange or leasing of property
- The lending of money or extensions of credit
- The furnishing of goods, services or facilities for money (for example, purchasing office supplies, printing services or insurance from a disqualified person)
- The transfer of the income or assets of the foundation to a disqualified person or the use of such assets by or for the benefit of a disqualified person (which includes satisfying an enforceable, personal charitable pledge previously made by a disqualified person)
- The payment of money or property to a government official
These rules can be very complicated and can be quite frustrating to foundation managers, as they arise in a number of seemingly innocuous situations. Because of the complexity of these rules, foundation managers should consult counsel anytime they are contemplating a transaction with a disqualified person.